Insurers absorb the risk when entertainers can’t go on

Late last fall, Kanye West cancelled the balance of his tour dates from mid-November through New Year’s Eve, citing exhaustion. For promoters, ticket agents, venues and anyone else involved with the tour, the cancellation meant a major drop in revenue.

Concerts are very big business these days and cancelling a single event can cost a venue millions. Cancel all or even part of a concert series, and you’re talking significant losses.

According to Forbes magazine, Bruce Springsteen brought in more than $171 million in ticket sales for The River Tour within the first six months of 2016. Beyoncé and her Formation World Tour amassed $137 million in the same period.

Significant changes in music business

The music business has changed significantly in the last decade. “Since the birth of digital media like iTunes, the business end of what an artist and agent do has changed,” explained David Boyle, contingency class underwriter for ArgoGlobal, a Lloyd’s syndicate. “Revenue sources have changed from CDs to people downloading music to iPods. In order to make money when CD sales dropped off, artists started touring in the early 2000s. That had the effect of taking an artist who might make their money from record sales and doing a short tour to doing major tours.”

For the artists, this means a greater strain on them physically, as well as their vocal chords. “The revenue has shifted from record sales to touring income,” added Boyle. He described one British artist who had 109 tour dates scheduled for the first six to nine months of this year.

Insuring against the loss

In cases like West’s, where he was physically unable to go on stage, artists and anyone else with a financial interest in a concert proceeding will purchase a cancellation or non-appearance policy before the event. Cancellation insurance covers any eventuality that is not specifically excluded for the event not going ahead, and can include issues like a gas leak, earthquake, hurricane or just a heavy rainstorm.

With the non-appearance policy, Boyle said this can cover any reason for cancelling including death, accident, illness or a travel delay for the artist or the band.

“Take for example a concert in Miami in September,” explained Boyle. “You would look at where the event is being held — is it on the beach, outside or inside. Is there are risk of storm surge or wind storm, what is the level of experience of the organizers — have they done this before? What risks are there with the venue?” All of these go factors go into determining the level of risk and amount of coverage required for the event.

“The majority of the risks come from the performer,” Boyle continued. “Where is that person coming from? Is he coming from Orlando or somewhere in Japan because then there is a risk of a travel delay.”

Risks due to age

Insurers also look at the life rate for older band members, which can be increased by the risk of death, an accident or illness due to age. Elton John is 69. Mick Jagger is 73, and the Boss, Bruce Springsteen, is 67, and all are touring more than they ever have before. “These performers can make seven-figure salaries per person per appearance, and the risks and rewards have never been greater,” said Boyle.

Insurers take into account the length of the tour, the amount of time performers have to recover between dates, as well as the complexity of the sets when determining coverage limits. Stage sets today are far more intricate, using multi-media screens and staging which can be damaged while being transported between venues. Boyle said that one performer cancelled a concert because his screen was cracked while being moved to the site.

Securing coverage

Boyle said that the basic coverage for shows and performers doesn’t change too much. Terrorism coverage is usually excluded, but it can be purchased in addition to the general liability coverage. As tours get bigger and go to more exotic and dangerous locales, the venues and performers will also take out their own insurance policies to cover their guarantees. This may include agents insuring for their fees, the venue taking out insurance on the performer, ticket brokers and services like Live Nation purchasing a comprehensive program to cover every aspect of a concert from terrorism to coverage for communicable diseases.

Performers must also walk a fine line when it comes to coverage. Even though they know they have insurance in case an emergency arises or the show must be cancelled, they must act like they are uninsured. If a performer decides he doesn’t want to go on at the last minute and figures that insurance will cover all of the ensuing losses, that type of event would actually not be covered by a policy.

Boyle said occasionally they get some unusual requests for coverage. “One performer wanted to insure his dog while touring. Performers frequently include close family members and friends and children for coverage while touring as well.”

High-risk activities

If a performer likes to pursue high-risk activities like race car driving or sky diving, some policies do have a hazardous activity exclusion that requires the insured to let the insurance company know that he or she is participating in the activity outside of performing. The insurer can then decide whether or not to cover that risk.

Most venues have dedicated risk managers who assess the risks because they want to move it from their balance sheet to the insurers, explained Boyle. However, it is important to remember “that the safety of everyone comes first, and the financial consideration is second,” he added.

Boyle said that the price of coverage has actually dropped over the last 10 years because there are more insurers in the market and it is easier to spread out some of the risk.

In the end, it is all about managing a variety of threats to ensure that everyone will get paid even if the show doesn’t go on as planned.





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